S&P Move Past All-Time High; Portfolio For 2nd Half of 2013; GDP Forecasts
The S&P moved past its all-time high of 1565 (reached Oct. 2007) and closed at 1569 on Thursday, March 28 &, the last trading day of the first quarter. The S&P rose over 11% for the quarter & both the DOW & S&P are in record territory. So, what happens next? Historically, April is the best month in U.S. stocks going back to 1950. We are well overdue for a correction and extremely over-bought in the immediate short-term. First quarter earnings and 2nd quarter forecasts will begin in two weeks. We will need to see earnings beats on the street. After such an amazing ride up since January — companies that miss on the low side are likely to get heavily punished.
How much farther up can we go without a correction? No one knows. There are two old street sayings that are appropriate: “The market can stay irrational longer than you can stay solvent.” The other, “sell in May and go away.” Even if we get a garden variety correction (5% – 10%), — which would be healthy — there is likely to be buying on the dips and any correction short-lived (based on what we know now). Moreover, feared outflows of capital from European equities (in aftermath of Cyprus “bail-in,” and involuntary confiscation of deposits >100K Euros) is in full swing according to Genna Goddfrey, Head of Investment Strategy at Brooks Macdonald. As these investors move their money out of Europe and to the U.S. and elsewhere, the U.S. stock market/equities could be a big beneficiary. While even the most bullish firms on the street are not expecting three more quarters of 10% or greater gains per quarter — this is still shaping up to be one for the history books. The trend is your friend — until it isn’t. We’re likely still going higher; but, the chances of a correction in the immediate short-term are (as rated by firms on the street) are at the 80% or higher in the next four weeks. Traders are likely to continue to defensively invest (utilities, consumer staples, etc.) till we get some kind of correction.
The troubles in Europe aren’t going away. Italy doesn’t look like it will have a definitive leader and early elections in a couple of months look all but certain. ECB Chairman Mario Draghi, who was interestingly silent during the Cyprus crisis, — will chair an ECB meeting on April 4th and many are expecting him to initiate some kind of “QE” program and once again renew his call for a fully integrated European financial and banking system. Here in the U.S., we will get the all important non-farms payroll numbers on Friday morning at 0830. Potential Black Swans abound (North Korea, Iran nuclear, Italy/Spain higher bond yields, unemployment throughout Europe, Cyber “Pearl Harbor, early Fed exit from QE, slowdown in China, etc.” But unless they materialize in some meaningful way, this market will still climb a wall of worry.
Selected Quarter 1 GDP Numbers & Quarter 2 GDP Forecasts
Q1 2013 GDP Q2 GDP Forecasts
Germany +2.3% Germany +2.6%
France -0.6% France +0.5%
Italy -1.6% Italy -1.0
UK +0.5% UK +1.4%
Japan +3.2% Japan +2.2%
U.S. +3.5% U.S. +2%
I will see what I can find out for China’s numbers this weekend.
Technology Research Firm Gartner Projects Worldwide IT Spending for 2013
Gartner projects worldwide IT spending will top $3.8T in 2013, a 4% increase from 2012. Gartner analyzes IT spending in five categories: Devices, data centers, IT, software and telecommunications. Gartner expects stronger than expected sales in the mobile space to offset the flat-lining of the PC market. By 2017, Gartner expects more than 50% of all IT spending will be in the mobile device area. There will be fewer and fewer households with PCs; but, many more mobile devices and SmartPhones.
What I like to know is more about the big data-mining, data-“farming,” cyber offense/defense, cyber security and virus/malware protection areas. If any of you know, please share with my blog. All for now. V/R, R.C. Porter.